Tencent Denies Rumors Concerning China Mobile Taking Stake

On October 24, news emerged that China Mobile, a multimedia service provider through its nationwide mobile telecommunications network, might take a stake in Chinese tech giant Tencent, which was subsequently denied by Tencent.

As of the close of October 24, Tencent‘s stock price fell 11.43% to HK $206.2. Previously, its share price traded as high as HK $758.9 in February 2021, with a market value of over HK $7 trillion.

In fact, China Mobile and Tencent have many similarities. For example, both of them focus on people’s information exchange, and they are inextricably intertwined in the development process of the past 30 years.

Tencent‘s first rapid development period was helped by China Mobile. At the end of 2000, China Mobile launched a business plan to build a bridge between service providers and users.

At that time, Tencent, which held hundreds of millions of users, quickly cut into the field of mobile and telecom value-added services, and made use of its relationship with China Mobile to become a service provider. At the end of 2001, Tencent‘s annual revenue reached 50 million yuan ($6.88 million). At that time, China Mobile had become the largest mobile communication operator in the world with an annual income of 134.68 billion yuan.

Since 2002, Tencent has developed fast and in June 2004, it went public in Hong Kong. However, the company hasn’t completely shaken off its dependence on China Mobile. In 2004, Tencent‘s revenue was 1,143.5 million yuan, and its mobile and telecom value-added service revenue totaled 641.2 million yuan, accounting for 56.07% of total revenue. The revenue of Internet value-added services was 439 million yuan, accounting for 38.39%.

In January 2011, Tencent launched WeChat using QQ as its model, and its core function is to support the rapid exchange of short messages, videos, pictures and texts across communication operators and operating systems. Eight months later, China Mobile launched Feiliao. In contrast to WeChat, Feiliao used a mobile phone number as user identification, which can interact with SMS. However, Feiliao ceased operations in July 2013. At that time, WeChat had more than 400 million Chinese users and more than 100 million overseas users.

In 2012, Tencent finally removed itself from its dependence on China Mobile. Its revenue proportion of mobile and telecom value-added services dropped to 8.6% with the main revenue being derived from Internet value-added services (mainly game business).

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In 2018, Tencent took the initiative to adjust its organizational structure, mainly to fuse artificial intelligence, big data and cloud computing, which, the company believes, will have far-reaching implications in the future. In 2019, China Mobile’s performance was not as good. Its operating income in the first three quarters of 2019 was 566.7 billion yuan, down 0.2% from the same period of the previous year, while its net profit was 81.8 billion yuan, down 13.9% year-on-year.

Currently, China Mobile still lags far behind Tencent in terms of market value, totaling HK $1.44 trillion and HK $1.98 trillion respectively.